Congress Continues to Influence Puerto Rico Financial Board

Posted June 21, 2017

The Puerto Rico Financial Oversight and Management Board (FOMB), created by the PROMESA law, has been the subject of a number of complaints and concerns from members of the U.S. Congress. There have also been complaints about the board directed to the U.S. Congress.

On June 15, Congressman Rob Bishop (R-UT), Chairman of the House Natural Resources Committee and primary author of the PROMESA legislation, wrote a letter to FOMB Chairman Jose Carrion requesting that the agreement with the creditors of the Puerto Rico Electric Power Authority (PREPA), Puerto Rico’s public electric utility, be grandfathered into PROMESA decisions. “Congress intended the protection and preservation of any consensually negotiated, voluntary agreements prior to the enactment of PROMESA,” he wrote, adding that the PROMESA Restructuring Support Agreement (RSA) “is the only such agreement.”

Chairman Bishop also directed that decisions made by the Board should be explained in writing to the Natural Resources committee.

The following day, two other legislators, Rep. Nydia Velazquez (D-NY) and Rep. Raul Grijalva (D-AZ), co-wrote a competing letter directing the FOMB to “carefully examine the economic effects” that the PREPA RSA “will have on every resident of the Island,” noting that the Board “has clear legal authority to consider: the RSA. The Members also expressing their alarm that the cost of electricity was not being reduced, as had been recommended in a number of different conversations about setting Puerto Rico on a path to renewed prosperity.

“While some of my colleagues in Congress believe that creditors’ concerns lie before the needs of the most vulnerable,” this letter stated, “PROMESA clearly stated that Congress’s intent was to provide Puerto Rico the tools to comprehensively restructure its debt and lay out a path forward.”

The reference to “some colleagues” might have been a nod to a couple of letters from Tom Cotton (R-AR) (one of them also signed by Sen. Thom Tillis (R-NC)) demanding an explanation of why creditors are not always being put ahead of public services.

A lack of transparency toward the people of Puerto Rico, evidenced by the failure of the territorial government to invite members of the community to testify in budget hearings

The decision by the Oversight Board that Governor Rossello’s budget was “in substantial compliance” with PROMESA in spite of some concerns

Decisions and information being presented to the people by the Governor rather than the Oversight Board itself

While the authors of the various letters have different goals and a range of hoped-for outcomes, they demonstrate a shared belief that the U.S. Congress continues to bear responsibility for Puerto Rico as the Oversight Board moves forward.

The tasks given to the Oversight Board are difficult, and the board will perhaps inevitably disappoint stakeholders — particularly given that the stakeholders are not in agreement among themselves. As concerns arise, these stakeholders are turning to Congress, the source of the Oversight Board’s power.

The U.S. House Natural Resources Committee is rumored to be considering holding a hearing at the end of July to evaluate the performance of the PROMESA Oversight Board.